Half Year Results Announced 30 September 2016

Palace Capital, the property investment company that focuses on commercial property mainly outside London, is pleased to announce its half yearly results for the six months to 30 September 2016.

 

Highlights

 

Financial Highlights

·      Interim dividend up 29% to 9p (H1 2016: 7p)

·      NAV per share up 1.2% to 419p at 30 September 2016 (FY 2016: 414p)

·      Portfolio valuation at 30 September 2016: £184.8 million (31 March 2016: £174.5 million)

·      Rental income of £7.0 million (H1 2016: £5.4 million)

·      Profit before tax of £3.9 million (H1 2016: £7.6 million)

·      Adjusted EPS*: 10.8p (H1 2016: 9.1p)

·      Average cost of debt reduced to 2.9% (FY 2016: 3.1%)

·      Cash available at 30 September 2016: £9.3 million (FY 2016: £8.6 million)

 

*Adjusted EPS is recurring earnings per share, excluding one-off exceptional items and fair value movements.

 

Operational Highlights

·      Annualised contracted rental income increased to £13.7 million (FY 2016: £13.5 million)

·      Acquisition of Boulton House, Manchester for £10.6 million was made during H1, with an income of £0.6 million and a potential reversion to £0.9 million, showing a 5.5% net initial yield and 8.5% reversionary yield, with significant asset management potential

·      Total ownership of 1.8 million sq ft

·      Overall occupancy maintained at 89%

·      WAULT of 5.8 years (to break) (FY 2016: 6.3 years)

·      Number of leases 210 (FY 2016: 194)

 

The Company’s portfolio is benefitting from the active management programme, including:

·      Improved occupier demand

·      Rental uplifts

·      Reducing incentives and increasing lease terms

·      Change of use and planning approvals

·      Vacant office space refurbishment

 

Stanley Davis, the Chairman of Palace Capital said;

“I am pleased to report that Palace Capital continues to demonstrate both income and capital growth and we believe this sets us apart from our peers. NAV per share is up to 419 pence per share and proposed interim dividend is 9 pence per share. We have not seen a negative impact from Brexit on our portfolio, which appears to be a London-focused issue, in fact we have seen increased activity in the towns and cities in which  we operate.

We are making headway on several of our strategic assets and with our policy of sourcing opportunities both directly and corporately, I continue to be very optimistic about our future.”

 

Date: 21 November 2016

 

For further information contact:

 

Palace Capital plc

Neil Sinclair, Chief Executive

Stephen Silvester, Finance Director

Tel. +44 (0)20 3301 8331

 

Allenby Capital Limited (Nominated Adviser and Joint Broker)

Nick Naylor / James Reeve

Tel. +44 (0)20 3328 5656

 

Arden Partners plc (Joint Broker)

Chris Hardie / Ciaran Walsh

Tel. +44 (0)20 7614 5917

 

Capital Access Group (Financial PR)

Scott Fulton / Jessica Bradford

Tel. +44 (0)20 3763 3400

 

CHAIRMAN’S STATEMENT – INTERIM RESULTS – HALF YEAR ENDED 30 SEPTEMBER 2016

 

I am pleased to report our interim results for the six months ended 30 September 2016 which show that the Company has made a profit before tax of £3.9million. We have continued to develop our portfolio during this period, albeit cautiously having some regard to the emerging implications of the EU referendum.

 

At 30 September 2016, our portfolio was valued by Cushman & Wakefield at £183.7 million, with a contracted rent roll of £13.7 million per annum and a net income after property costs of £11.7 million per annum. We maintain a conservative level of gearing and during this period our European Public Real Estate Association (“EPRA”) NAV per share has increased by 1.2% to 419p per share, representing a net asset value of £107.5 million.

 

We continue to grow recurring income in order to support our progressive dividend policy. For the 6 months to 30 September 2016 rental income net of non-recoverable costs totalled £5.9 million, up from £4.5 million in the comparative period, after stripping out the one-off surrender premium of £3.0 million received from Gala Casinos Limited at Sol Central, Northampton in September 2015.

 

The Board’s clear strategy is to increase shareholder value by continuing to make sensible opportunistic acquisitions. It is an interesting observation that, since the management team took Board control in July 2010, we have made only 10 acquisitions, 6 of which have been corporate (i.e. acquiring the companies which owned the properties). We now own 50 properties with a total floor area of approximately 1.8 million sq. ft.

 

The significant acquisition made in this financial period was the freehold of Boulton House, Chorlton Street, Manchester for £10.6 million. The Company’s management had been assessing the Manchester market for over two years but when previous opportunities arose the prices required would not have provided the Company a sufficient return. However, the uncertainty caused by the calling of the EU referendum meant that a number of potential purchasers decided to withdraw from the market pending the outcome. This gave us a window of opportunity to buy a significant office building within 3-4 minutes’ walk of Manchester Piccadilly Station.

 

We have a highly experienced team and I consider that we are very well placed to take advantage of the opportunities that we think will arise in the months ahead.

 

We have continued to recycle our capital and actively manage our portfolio.  We have sold £2.9 million of our smaller or vacant assets at or above book value during the half year period, generating £0.9 million profit on disposal.

 

Strategic development

 

We have grown the Company by acquisition via equity issues and conservative borrowing so that, as at today, the company has a market capitalisation approaching £100 million. We intend to continue to grow Palace Capital through selective acquisitions, preferably off-market, where properties have either failed to sell or where owners do not want exposure to a public marketing process. This policy has stood us in good stead to date and we see no reason to change our approach. We place emphasis on properties that have short to medium term refurbishment and development potential.

 

In addition, we continue to seek and examine appropriate corporate acquisitions which conform to our criteria.

 

I am particularly pleased with the strength of our Management Team, with Richard Starr becoming a full time Executive Director in July of this year and Andrew Thomas joining us as Investment Manager from Orchard Street Investment Management.

 

Our model of outsourcing Property Management and Project Management is pivotal as, in our view, it provides cost efficiencies while allowing our team to focus on potential acquisitions and managing the portfolio’s assets to create additional value.

 

Portfolio activity

 

Our particular brand of active management is delivering in terms of adding value and boosting income. We announced a portfolio update on 2 November 2016 and we would summarise the current position on some of our key properties as follows:

 

Hudson House, Toft Green, York

 

This 103,000 sq. ft. office building is located within the ancient City Wall, but only one minute’s walk from York Railway Station and is regarded as a prime location.

 

City of York Council & Network Rail have announced plans for the surplus railway land around York Station to be redeveloped comprehensively over the next 20 years. This will include a significant commercial and residential element. This area is now known as York Central and is an exciting opportunity that can only benefit our property.

 

We already have consent for a change of use to 139 apartments. In a further planning move, we now also have a resolution to grant permission to convert Hudson House to 82 apartments and 37,000 sq ft of offices.

 

Notwithstanding these alternative schemes, the Board believes that the optimum value can be secured by redeveloping the entire site. As a result, the Company’s architects and planning advisers are in detailed discussion with City of York Council. We had hoped to be able to submit a planning application by the end of the year but we are determined to iron out all issues first with the Council and it is now envisaged that an application will be submitted in March 2017.

 

The Company is currently bearing the cost of part of the building remaining empty, pending the outcome of the planning application. Vacant rates, although partly mitigated, as well as service charge shortfall will affect profits in the short term. The Directors believe that this is the correct approach, as since its purchase in October 2013, the value of Hudson House has increased from £3.8 million to £14.9 million as at 30 September 2016 and they consider there to be further potential value achievable with a redevelopment. Once planning consent is achieved, the Board will seek to maximise the value having regard to minimising the risk to shareholders.

 

Sol Central, Marefair, Northampton

 

We are making progress to improve our large mixed use leisure scheme in Central Northampton although rather more slowly than we would like. However, we submitted a planning application to change the use of the former Gala Casino premises to Class A3 (Restaurant and Cafes) and this was granted on 31 October 2016.

 

There is ongoing development activity in Northampton, much of it within 15 minutes’ walk of Sol Central. A new County Council headquarters office building, known as 1 Angel Square, is due to be completed next month and will accommodate 2,000 people, whilst the town’s new £330 million University campus is under construction. These can only have a positive effect on Sol Central and its ability to enhance income in the medium term.

 

Broad Street Plaza, Halifax

 

We only have a small unit unlet in this 118,000 sq. ft. leisure complex. However, we are not passive owners, so we have instructed a marketing company to advise as to increasing footfall and awareness further, with an emphasis on social media.

 

Boulton House, Chorlton Street, Manchester

 

We completed the purchase of this 75,000 sq. ft. office building in Central Manchester in August of this year. There is circa 18,500 sq. ft. of office space currently vacant and we have placed a contract to refurbish this space. In addition, we intend to remodel the entrance hall and part of the exterior.

 

The building is currently let at very modest rents. Demand for well-located offices in Central Manchester is robust and we are confident of the potential for future rental growth. It also has significant medium term development potential, as it stands on a site of c. 26,000 sq. ft. within three minutes’ walk of Manchester Piccadilly Railway Station.

 

Bank House, King Street, Leeds

 

We are refurbishing the space formerly occupied by AXA that comprises c. 13,300 sq. ft. Coupled with the space adjoining of c. 3,300 sq. ft., we will be able to offer 16,600 sq. ft. on one floor in January 2017 at a very competitive office rental level for Central Leeds.

 

Former Polestar Building, Marsh Barton Trading Estate, Exeter

 

We recently announced that we had let this 113,000 sq. ft. industrial building to Wheatons (Exeter) Ltd on a lease for a term of 10 years from August of this year without a break at an initial rental of £282,000 per annum exclusive for the first 18 months, rising to £452,000 per annum exclusive in February 2018 until a rent review in August 2021, when the rent will rise to no less than £485,900 per annum exclusive.

 

As stated in our annual report, Administrators were appointed to our original tenant and then its successor and the outlook here did not look promising earlier this year with the prospect of empty rates, running costs, security etc. However, our team worked diligently to conclude a transaction with the private equity group that acquired the assets from the Administrator and this was achieved earlier this month.

 

The Forum, Barnfield Road, Exeter

 

We announced earlier this month that we had finally let the remaining vacant space in this 39,000 sq ft office building in Central Exeter. This building formed part of the Sequel Portfolio acquired from Quintain Estates and Development in 2013 and 10,300 sq. ft. had been vacant for some time. The final two lettings will have a considerable cash flow benefit as we immediately benefit from a cessation of empty rates and service charge shortfall of £110,718 per annum, but we will also receive an additional £81,589 per annum when the rent-free periods expire in May 2017. At that time this property will produce £409,000 per annum exclusive and will be a core part of our portfolio.

 

The Copperfield Centre, Dartford, Kent

 

We have completed our £2.25 million conversion scheme to refurbish the vacant upper floor offices into 13 self-contained residential apartments. We are currently in discussion with a party interested in leasing all of these.

 

Solaris House, Kiln Farm, Pitfields, Milton Keynes

 

This 14,500 sq. ft. office building was vacated earlier this year. We have placed a contract to refurbish the building as Milton Keynes is one of the fastest growing cities in the UK. It will be carried out to a similar standard to that of our two adjoining office buildings currently let to Rockwell Automation until December 2026.

 

Imperial Court & Imperial House, Leamington Spa

 

We recently renewed the lease with Altair UK that occupies 6,000 sq. ft. and we have increased the rental to £99,858 per annum. The lease is for a term expiring in November 2022 but there is a mutual break to determine in November 2019 to coincide with other leases in the building. Imperial House occupies part of a site of c. 70,000 sq. ft. and we are keeping our options open in respect of a possible large redevelopment subject to a satisfactory and viable planning consent.

 

There are several other active management initiatives progressing with other properties in our portfolio in order to increase income and net asset value.

 

Borrowings

 

We continue to build very close relationships with our lenders. During the half year, we concluded a 10-year facility with Scottish Widows on our Broad Street Plaza, Halifax property of £15.2 million at a fixed rate of 2.9%. With the fixed increases in rent due in August 2017, we will achieve a near 17% return on our equity. We also secured a loan of £6.0 million from Santander on Boulton House, Manchester until June 2020 at a margin of 2.25% over LIBOR.  We have drawn down debt of £81.9 million which is a conservative net loan to value ratio of 39% with an average debt maturity of 5.1 years. The average cost of our debt is currently 2.9%, which can only be considered low compared against our peers in the real estate market.

 

Dividend

 

We intend to pay an interim dividend of 9p (2015: 7p) on Friday 30 December 2016 to shareholders on the register as at 9 December 2016. As we work to increase income we will continue to pursue a progressive dividend policy.

 

Outlook

 

Palace Capital is an exciting Company and I am privileged to be Chairman of the Board. My thanks go to my fellow Board Members and staff as well as our trusted advisers. I am delighted with the progress that we continue to make. Looking forward we view the EU referendum result as in the interests of Palace, as we believe that significant opportunities will become available to enable us to continue to create shareholder value.

 

As mentioned in previous statements our aspiration is to join the Official List of the London Stock Exchange and this will be kept under constant review.  We are making headway on several of our strategic assets and with our policy of sourcing opportunities both directly and corporately, I continue to be very optimistic about our future.

 

Stanley Davis, Chairman

21 November 2016

 

 

 

 

Palace Capital Plc

Condensed consolidated statement of comprehensive income

for the six months ended 30 September 2016


 

 

 

 

 

 

 

Notes

 

Unaudited

6 months to

30 September

2016

£000

Unaudited

6 months to

30 September

2015

£000

Audited

Year to

31 March

2016

£000

 

 

 

 

 

 

Rental and other income

 

      3

 

7,076

8,364

14,593

Property operating expenses

 

 

 

(1,140)

(880)

(1,624)

Net rental income

 

 

5,936

7,484

12,969

 

 

 

 

 

 

Administrative costs

 

 

(1,369)

(1,035)

(2,048)

Operating profit before gains on investment properties

 

 

4,567

6,449

10,921

 

 

 

 

 

 

Acquisition costs

 

 

(413)

(815)

Gains on revaluation of investment properties

8

 

32

2,308

3,620

Profit on disposal of investment properties

 

 

873

208

290

Operating profit

 

 

5,472

8,552

14,016

 

 

 

 

 

 

Finance income

 

 

8

34

Finance costs

 

 

(1,562)

(991)

(2,298)

Profit before taxation

 

 

3,910

7,569

11,752

 

 

 

 

 

 

Taxation

   4

 

(464)

(396)

(953)

Profit for the period and total comprehensive income

 

 

3,446

7,173

10,799

 

 

 

                  

                 

                  

 

 

 

 

 

 

 

 

 

 

Earnings per ordinary share

 

 

Basic

6

 

13.4p

30.6p

43.9p

Diluted

6

 

13.4p

30.6p

43.9p

EPRA basic

6

 

10.4p

21.7p

31.3p

Adjusted EPS

6

 

10.8p

9.1p

18.9p

 

The accompanying notes form an integral part of these condensed consolidated interim financial statements.

 

 

 

Palace Capital Plc

Condensed consolidated statement of financial position

30 September 2016


 

 

 

Notes

Unaudited

30 September

2016

£000

Unaudited

30 September

2015

£000

Audited

31 March

2016

£000

Non-current assets

 

 

 

 

Goodwill

 

 

6

Investment properties

 

8

140,350

174,542

Tangible fixed assets

 

 

44

37

Deferred tax

 

 

500

334

Trade and other receivables

 

9

935

825 

 

 

 

141,835

175,738

 

 

 

 

 

Current assets

 

 

 

 

Trade and other receivables

 

9

4,144

3,327

Cash and cash equivalents

 

 

18,689

8,576

Total current assets

 

 

22,833

11,903

Total assets

 

 

164,668

187,641

 

 

 

 

 

                  

Current liabilities

 

 

 

 

 

Trade and other payables

 

10

(7,132)

(6,815)

Borrowings

 

11

(3,241)

(850)

(2,233)

Total current liabilities

 

 

(7,982)

(9,048)

 

 

 

Net current assets

14,851

2,855

 

 

 

 

 

Non-current liabilities

 

 

 

 

Borrowings

 

11

(49,678)

(69,711)

Obligations under finance leases

 

 

(2,070)

(2,067)

Total non-current liabilities

 

 

(51,748)

(71,778)

 

 

 

 

 

Net Assets

 

 

104,938

106,815

 

 

 

                   

 

                 

Equity

 

 

 

 

Share capital

 

12

2,862

2,862

Share premium account

 

 

59,412

59,408

Merger reserve

 

 

3,503

3,503

Capital redemption reserve

 

 

65

65

Treasury share reserve

 

 

Retained earnings

 

 

39,096

40,977

Equity shareholders’ funds

104,938

106,815

 

 

 

 

 

                 

Basic NAV per ordinary share

 

7

419p

407p

414p

Diluted NAV per ordinary share

 

7

419p

407p

414p

EPRA NAV per ordinary share

 

7

419p

407p

414p

 

The accompanying notes form an integral part of these condensed consolidated interim financial statements.

The condensed consolidated interim financial statements were approved by the Board of Directors on 18 November 2016.

 

 

 

 

Palace Capital Plc

Condensed consolidated statement of cash flows

for the six months ended 30 September 2016


 

 

 

 

 

 

Notes

Unaudited

6 months to

30 September

2016

£000

Unaudited

6 months to

30 September

2015

£000

Audited

Year to

31 March

2016

£000

Operating activities

 

 

 

 

Profit before tax

 

3,910

7,569

11,752

Adjustments for non-cash items: 

 

Profit on sale of investment properties

 

(873)

(208)

(290)

Gain on revaluation of investment properties

 

(32)

(2,308)

(3,620)

Goodwill write-off

 

6

Depreciation

 

10

10

18

Share-based payment

 

95

50

110

Net finance costs

 

1,562

983

2,264

Cash generated by operations

 

4,672

6,096

10,240

Changes in working capital

 

476

3,006

2,047

 

 

 

 

 

Cash flows from operations

 

5,148

9,102

12,287

Interest received

 

16

34

Corporation tax received / (paid) 

 

10

(137)

(158)

Interest and other finance costs paid

 

(1,269)

(1,187)

(3,455)

 

 

 

 

 

Cash flows from operating activities

 

3,889

7,794

8,708

 

 

 

 

 

Investing activities

 

 

 

 

Purchase of property, plant and equipment

 

(8)

(1)

(3)

Capital Expenditure on refurbishment of property

 

(2,187)

(1,182)

Purchase of investment property

 

(10,950)

(14,944)

(21,689)

Proceeds from disposal of investment properties

 

3,797

1,654

1,957

Payment to acquire subsidiary undertakings

 

(29,095)

 

 

 

 

 

Cash flows from investing activities

 

(9,348)

(13,291)

(50,012)

 

 

 

 

 

Financing activities

 

 

 

 

Issue of ordinary share capital

 

38

   19,115

19,114

Dividends paid

5

(2,308)

(1,416)

(3,221)

Other loans repaid

 

(3,219)

 

Bank loan received

 

25,082

15,885

38,282

Bank loan repaid

 

(16,031)

(18,457)

(17,010)

Capital element of finance lease rental payments

 

(1)

(1)

(2)

Purchase of treasury shares

 

(541)

Fees relating to cancellation of deferred shares

 

(9)

 

                 

Cash flows from financing activities

 

6,230

11,907

37,163

 

 

 

 

 

Net increase/(decrease) in cash

 

771

6,410

(4,141)

Opening cash and cash equivalents

 

8,576

12,279

12,278

Cash acquired

 

 

 

439

Closing cash and cash equivalents

 

9,347

18,689

8,576

 

 

                   

                   

                 

 

 

 

 

 

The accompanying notes form an integral part of these condensed consolidated interim financial statements.

Palace Capital Plc

Condensed consolidated statement of changes in equity

for the six months ended 30 September 2016


 

 

 

Share

Capital

£000

 

Share

 Premium

£000

Treasury

Shares

Reserve

£000

 

Merger

Reserve

£000

Capital Redemption reserve

£000

 

Retained earnings

£000

 

Total 

equity

 £000

As at 31 March 2015

2,307

40,852

3,503

65

33,289

 80,016

 

 

 

 

 

 

 

 

Total comprehensive income for the period

7,173

7,173

Share based payments

50

50

Issue of new shares

555

18,560

19,115

Dividends

(1,416)

(1,416)

 

    

     

 

 

 

  

  

As at 30 September 2015

2,862

59,412

3,503

65

39,096

104,938

 

 

 

 

 

 

 

 

Total comprehensive income for the period

3,626

3,626

Share based payments

60

60

Issue of new shares

(4)

(4)

Dividends

(1,805)

(1,805)

 

 

 

 

 

 

 

 

As at 31 March 2016

2,862

59,408

3,503

65

40,977

106,815

 

 

 

 

 

 

 

 

Total comprehensive income for the period

3,446

3,446

Share based payments

95

95

Purchase of treasury shares

(541)

(541)

Issue of new ordinary shares

2

36

38

Redemption of deferred shares

(284)

 

275

(9)

Dividends

(2,308)

(2,308)

 

 

 

 

 

 

 

As at 30 September 2016

2,580

59,444

 

(541)

3,503

340

42,210

107,536

 

The accompanying notes form an integral part of these condensed consolidated interim financial statements.

 

 

 

                                                                                                                              

Palace Capital Plc

Notes to the condensed consolidated financial statements                                           

for the six months ended 30 September 2016


 

1              General information

 

These financial statements are for Palace Capital Plc (“the Company”) and its subsidiary undertakings.

 

The Company’s shares are admitted to trading on AIM, a market operated by the London Stock Exchange plc. The Company is domiciled and registered in England and Wales and incorporated under the Companies Act 1985.  The address of its registered office is 41 Chalton Street, London, NW1 1JD.

 

The nature of the Company’s operations and its principal activities are that of property investment in the UK mainly through corporate acquisitions.

 

Basis of preparation

 

The condensed consolidated financial information included in this half yearly report has been prepared in accordance with the IAS 34 “Interim Financial Reporting”, as adopted by the European Union. The current period information presented in this document is unaudited and does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006.

 

The interim results have been prepared in accordance with applicable International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB).  These standards are collectively referred to as “IFRS”.

The accounting policies and methods of computations used are consistent with those as reported in the Group’s Annual Report for the year ended 31 March 2016 and are expected to be used in the Group’s Annual Report for the year ended 31 March 2017.

The financial information for the year ended 31 March 2016 presented in these unaudited condensed group interim financial statements does not constitute the Company’s statutory accounts for that period but has been derived from them. The Report and Accounts for the year ended 31 March 2016 were audited and have been filed with the Registrar of Companies. The Independent Auditor’s Report on the Report and Accounts for the year ended 31 March 2016 was unqualified and did not draw attention to any matters by way of emphasis and did not contain statements under s498(2) or (3) of the Companies Act 2006. The financial information for the periods ended 30 September 2015 and 30 September 2016 are unaudited and have not been subject to a review in accordance with International Standard on Review Engagements 2410, Review of Interim Financial Information performed by the Independent Auditor of the Entity, issued by the Auditing Practices Board.

 

The interim report was approved by the Board of Directors on 18 November 2016.

 

Copies of this statement are available to the public for collection at the Company’s Registered Office at 41 Chalton Street, London, NW1 1JD and on the Company’s website, www.palacecapitalplc.com>.

 

Going Concern

The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Chairman’s Statement. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in these financial statements.

The Directors have reviewed the current and projected financial position of the Group, making reasonable assumptions about future trading performance. As part of the review the Directors have considered the Group’s cash balances, debt maturity profile of its undrawn facilities, and the long-term nature of tenant leases. On the basis of this review, and after making due enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue operational existence for the foreseeable future. As a consequence, the Directors believe that the Group is well placed to manage its business risk successfully.

Accordingly, they continue to adopt the going concern basis in preparing the Half Year Report.

 

2              Segmental reporting

During the period the Group operated in one business segment, being property investment in the UK and as such no further information is provided.

 

3              Net property income

 

 

Unaudited

6 months to

30 September

2016

£000

Unaudited

6 months to

30 September

2015

£000

Audited

Year to

31 March

2016

£000

 

 

 

 

 

Rent receivable

 

7,014

5,364

11,375

Surrender premium

 

3,000

3,172

Management fees & other income

 

62

               46

Total revenue

 

7,076

8,364

14,593

Service charge & vacant rates

 

(942)

(580)

(1,511)

Repairs and dilapidation costs

 

(43)

(154)

(90)

Other property costs

 

(155)

(146)

(23)

Property operating expenses

 

(1,140)

(880)

(1,624)

 

 

 

 

 

Net property income

 

5,936

7,484

12,969

 

 

4              Taxation

 

 

Unaudited

6 months to

30 September

2016

£000

Unaudited

6 months to

30 September

2015

£000

Audited

Year to

31 March

2016

£000

 

 

 

 

 

Current income tax charge

 

295

396

726

Tax underprovided in prior year

 

6

Deferred tax

 

169

221

Tax charge

 

464

396

953

 

 

 

5              Dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

Payment Date

Unaudited

6 months to

30 September

2016

£000

Unaudited

6 months to

30 September

2015

£000

Audited

Year to

31 March

2016

£000

Ordinary dividends paid

 

 

 

 

 

 

 

 

 

 

 

 

2015 Final dividend: 7p per share

 

 

 

 

 

 

 

 

31 July 2015

1,416

                  1,416

2016 Interim dividend: 7p per share

 

 

 

 

 

 

 

 

30 December 2015

                  1,805

2016 Final dividend: 9p per share

 

 

 

 

 

 

 

 

29 July 2016

2,308

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,308

            1,416

3,221

 

Proposed dividend

2017 Interim dividend: 9p per share payable on 30 December 2016.

 

On 21 November 2016, the Group announced it would pay an interim dividend of 9 pence per share to ordinary shareholders on the register on 9 December 2016, the ex-dividend date will be 8 December 2016 and the dividends will be paid on 30 December 2016.

 

 

6              Earnings per share

 

The European Public Real Estate Association (EPRA) has issued Best Practices Recommendations, the latest update of which was issued in December 2014, which give guidelines for performance measures.

 

EPRA earnings are calculated taking the profit after tax excluding investment property revaluations and gains or losses on disposals, changes in the fair value of financial instruments, acquisition costs and debt close-out costs. EPRA earnings is calculated on the basis of the basic number of shares in line with IFRS earnings as the dividends to which they give rise accrue to current shareholders and therefore it is more appropriate to use the basic number of shares. The EPRA diluted earnings per share also takes into account the dilution of share options and warrants if exercised.

 

Palace Capital also report on an adjusted earnings measure which is based on recurring earnings after tax excluding fair value adjustments accounting for derivatives, investment property and share based payments and on the basis of the basic number of shares.

 

The earnings per ordinary share for the period is calculated based upon the following information:

 

 

 

 

Unaudited

6 months to

30 September

2016

£000

Unaudited

6 months to

30 September

2015

£000

Audited

Year to

31 March

2016

£000

 

 

 

 

 

 

Profit after tax attributable to ordinary shareholders for the period

3,446

7,173

10,799

 

 

 

 

 

 

Adjustments to arrive at EPRA profit

 

 

 

 

Gains on revaluation of investment properties

(32)

(2,308)

(3,620)

 

Profit on disposal of investment properties

(873)

(208)

(290)

 

Cost of acquisitions

413

815

 

Debt termination cost

143

 

EPRA earnings for the period

2,684

5,070

7,704

 

 

 

 

 

 

Adjustments to arrive at Adjusted earnings

 

 

 

 

Share-based payment

95

50

110

 

Surrender premium received

(3,000)

(3,172)

 

 

 

 

 

 

Adjusted earnings for the period

2,779

2,120

4,642



 

 

 

Unaudited

6 months to

30 September

2016

 

Unaudited

6 months to

30 September

2015

 

Audited

Year to

31 March

2016

 

 

Basic weighted average number of ordinary shares

25,706,969

23,413,287

24,597,258

 

10,514

20,730

20,730

 

 

 

 

 

 

Diluted weighted average number of ordinary shares

25,717,483

23,434,017

24,617,988

 

 

                  

                  

                  

 

Earnings per ordinary share

 

 

 

 

Basic

13.4p

30.6p

43.9p

 

Diluted

13.4p

30.6p

43.9p

 

EPRA basic

10.4p

21.7p

31.3p

 

EPRA diluted

10.4p

21.6p

31.3p

 

Adjusted EPS

10.8p

9.1p

18.9p

 

7              Net asset value per share

 

EPRA NAV calculation makes adjustments to IFRS NAV to provide stakeholders with the most relevant information on the fair value of the assets and liabilities within a true real estate investment company with a long-term investment strategy. EPRA NAV is adjusted to take effect of the exercise of options, convertibles and other equity interests and excludes the fair value of financial instruments and deferred tax on latent gains. EPRA NNNAV measure is to report net asset value including fair values of financial instruments and deferred tax on latent gains.

 

Net asset value is calculated using the following information:

 

 

 

              Unaudited

 30 September

2016

£000

Unaudited

30 September

2015

£000

Audited

31 March

2016

£000

 

Net assets at the end of the period

107,536

104,938

106,815

 

Effect of exercise of share options

71

109

109

 

Diluted net assets

107,607

105,047

106,924

 

Exclude fair value of financial instruments & exclude deferred tax on latent capital gains

 

 

EPRA NAV

107,607

105,047

106,924

 

Include fair value of financial instruments & include deferred tax on latent capital gains

 

 

EPRA NNNAV

107,607

105,047

106,924

 

 

 

 

 

 

 

Unaudited

 30 September

2016

 

Unaudited

30 September

2015

 

Audited

31 March

2016

 

 

Number of ordinary shares of 10p each issued as at the end of the period

25,650,692

25,781,229

25,781,229

 

Number of unexpired share options

10,514

20,730

20,730

 

Number of diluted ordinary shares

25,661,206

25,801,959

25,801,959

 

 

 

 

 

 

Basic NAV per ordinary share

419p

407p

           414p

 

Diluted NAV per ordinary share

419p

407p

           414p

 

EPRA NAV per ordinary share

419p

407p

           414p

 

EPRA NNNAV per ordinary share

419p

407p

           414p

 

8              Investment Properties

 

 

Freehold Investment properties

Leasehold Investment properties

 

 

Total

 

 

£000

£000

£000

 

At 1 April 2015

84,568

18,420

                      102,988

Arising on acquisition of subsidiary

44,880

44,880

Additions – new properties

18,653

4,886

23,539

Additions – refurbishments

1,149

33

1,182

Gains on revaluation of investment properties

1,840

1,780

3,620

Disposals

(1,667)

(1,667)

At 31 March 2016

149,423

25,119

174,542

Additions – new properties

10,950

10,950

Additions – refurbishments

2,116

71

2,187

Gains on revaluation of investment properties

205

(173)

32

Disposals

(2,924)

(2,924)

At 30 September 2016

159,770

25,017

184,787

                                                        

Investment properties are stated at fair value based upon external valuations and is inherently subjective.  The fair value represents the amount at which the assets could be exchanged between a knowledgeable, willing buyer and a knowledgeable, willing seller in an arms-length transaction at the date of valuation, in accordance with IFRS 13.  The fair value of each of the properties has been assessed by the directors.  In determining the fair value of investment properties, the directors make use of historical and current market data as well as existing lease agreements

 

As a result of the level of judgement used in arriving at the market valuations, the amounts which may ultimately be realised in respect of any giving property may differ from the valuations shown in the statement of financial position.

 

At 30 September 2016, the Group’s freehold and leasehold investment properties were externally valued by Royal Institution of Chartered Surveyors (“RICS”) registered independent valuers. A reconciliation of the valuations carried out by the external valuers to the carrying values shown in the balance sheet was as follows:

 

 

 

Unaudited

 30 September

2016

£000

Unaudited

30 September

2015

£000

Audited

31 March

2016

£000

 

 

 

 

 

Fair value

 

183,650

139,315

173,441

 

 

 

 

 

Adjustment in respect of minimum payment

 

 

 

 

under head leases included as a liability

 

2,076

2,076

2,076

Less lease incentive balance in prepayments

 

(939)

(1,041)

(975)

 

 

 

 

 

Carrying value

 

184,787

140,350

174,542

 

 

                    

                  

                  

 

Investment properties with a carrying value of £161,656,761 (31 March 2016: £151,065,990) are subject to a first charge to secure the Group’s bank loans amounting to £81,864,383 (31 March 2016: £72,678,233).

 

Valuation process

 

The valuation reports produced by the external valuers are based on information provided by the Group such as current rents, terms and conditions of lease agreements, service charges and capital expenditure. This information is derived from the Group’s financial and property management systems and is subject to the Group’s overall control environment. In addition, the valuation reports are based on assumptions and valuation models used by the valuers. The assumptions are typically market related, such as yields and discount rates, and are based on their professional judgment and market observations.  Each property is considered a separate asset, based on its unique nature, characteristics and the risks of the property.

 

The executive director responsible for the valuation process, verifies all major inputs to the external valuation reports, assesses the individual property valuation changes from the prior period valuation report and holds discussions with the external valuers.  When this process is complete, the valuation report is recommended to the Audit Committee, which considers it as part of its overall responsibilities.

 

The key assumptions made in the valuation of the group’s investment properties are:

– The amount and timing of future income streams;

– Anticipated maintenance costs and other landlord’s liabilities; and

– An appropriate yield.

 

Valuation technique

 

The valuations reflect the tenancy data supplied by the group along with associated revenue costs and capital expenditure. The fair value of the commercial investment portfolio has been derived from capitalising the future estimated net income receipts at capitalisation rates reflected by recent arm’s length sales transactions.

 

9              Trade and other receivables

 

 

Unaudited

 30 September

2016

Unaudited

30 September

2015

£000

Audited

31 March

2016

£000

Current

 

 

 

 

Trade receivables

 

1,882

3,197

2,484

Prepayments and accrued income

 

758

861

738

Other taxes

 

68

Other debtors

 

530

86

37

 

 

3,170

4,144

3,327

 

 

 

 

 

Non-current

 

 

 

 

Prepayments and accrued income

 

809

935

825

 

 

809

935

825

                      

 

10           Current trade and other payables

 

 

Unaudited

 30 September

2016

Unaudited

30 September

2015

£000

Audited

31 March

2016

£000

 

 

 

 

 

Trade payables

 

850

184

638

Accruals

 

3,155

1,967

1,807

Deferred rental income

 

1,491

2,756

2,605

Taxes

 

2,396

2,219

1,698

Other payables

 

60

6

67

 

 

7,952

7,132

6,815

 

 

 

11           Borrowings

 

 

Unaudited

 30 September

2016

Unaudited

30 September

2015

£000

Audited

31 March

2016

£000

 

 

 

 

 

Current borrowings

 

3,241

850

2,233

Non-current borrowings

 

77,519

49,678

69,711

Total borrowings

 

80,760

50,528

71,944

 

 

 

 

 

Non-current borrowings

 

 

 

 

Secured bank loans drawn

 

78,623

50,242

70,445

Unamortised facility fees

 

(1,104)

(564)

(734)

 

 

77,519

49,678

69,711

 

 

                   

                   

                  

 

The maturity profile of the Group’s debt was as follows

 

 

Unaudited

 30 September

2016

Unaudited

30 September

2015

£000

Audited

31 March

2016

£000

 

 

 

 

 

Within one year

 

3,241

850

2,233

From one to two years

 

2,036

2,050

17,068

From two to five years

 

63,517

43,000

53,377

From five to ten years

 

13,070

Total borrowings

 

81,864

45,900

72,678

 

Facility and arrangement fees

As at 30 September 2016

Secured borrowings

 

Margin over

LIBOR %

Maturity

date

Facility drawn

£000

Unamortised facility fees

£000

Loan balance

£000

 

 

 

 

 

 

 

Scottish Widows

 

2.10%

Jul 2026

15,250

(236)

15,014

National Westminster Bank plc

 

2.50%

Mar 2021

26,168

(346)

25,822

Nationwide Building Society

2.45%

Nov 2020

19,167

(181)

18,986

Santander Bank plc

2.25%

Jun 2020

15,887

(276)

15,611

Lloyds Bank plc

2.10%

Apr 2019

4,187

(55)

4,132

Close Brothers Group plc

4.00%

Sep 2017

1,205

(10)

1,195

 

 

 

 

81,864

(1,104)

80,760

 

The Group has unused loan facilities amounting to £3.6m (31 March 16: £8.0m). Interest is charged on this facility at a rate of 1.25% and is payable quarterly. This facility is secured on the investment properties held by Property Investment Holdings Limited and Palace Capital (Properties) Limited.

 

12           Share capital

Authorised, issued and fully paid share capital is as follows:

 

 

Unaudited

 30 September

2016

Unaudited

30 September

2015

Audited

31 March

2016

 

 

 

 

 

Ordinary 10p shares 

 

             25,800,279

25,781,229

25,781,229

Deferred 90p shares

 

                                 –

315,937

315,937

 

 

                    

                   

                   

Share capital – number of shares in issue

 

              25,800,279

26,097,166

26,097,166

 

 

                    

                    

                   

Share capital – £

 

                 2,580,028

2,862,466

2,862,446

 

17 June 2016 The Company purchased 91,587 of its own ordinary shares of 10p each at an average price of 360 pence per ordinary share. On 20 June 2016, it purchased 58,000 of its own ordinary shares of 10p each at an average price of 360 pence per ordinary share. All of the purchased shares are held as treasury shares. Additional fees of £2,000 were incurred on the purchase of these treasury shares.

 

On 20 June 19,050 warrants were exercised for 19,050 new ordinary shares in the Company at a price of 200p thereby generating cash proceeds of £38,100 for the Company. Following the exercise of the warrants, the Company has no further warrants outstanding.

 

A reduction of the Company’s share capital by way of cancellation of the Deferred Shares was carried out and completed on 31 August 2016. The Company’s issued share capital included 315,938 Deferred Shares as at 31 March 2016. The nominal value of the Deferred Shares was part of the capital of the Company and therefore not distributable. The Deferred Shares were created as a result of the reorganisation of the Company’s share capital on 18 October 2013 when each issued ordinary share of £0.01 was consolidated and converted into one new Ordinary Share of £0.10 and one Deferred Share of £0.90. The Deferred Shares carried no voting or dividend rights and only very limited rights to participate in the capital of the Company upon a winding-up. These rights are such as to make the Deferred Shares virtually worthless in the hands of the holder.

 

In the Company’s books the capital paid up on the Deferred Shares represented £284,244, being the aggregate nominal value of all the Deferred Shares. Cancelling the Deferred Shares with the prior approval of Shareholders by way of a special resolution and the subsequent approval of the Court has resulted in the removal of them from the Company’s balance sheet and permitted an amount of £284,244 to be released to the Capital Redemption Reserve, which may be used to reduce or eliminate losses (if any) arising on the profit and loss account, and will also be retained for the protection of the Company’s creditors that are in existence as at the date of the Capital Reduction. Additional fees of £8,786 were incurred as a result of the cancellation of the Deferred Shares and have been recognised as a debit against the Capital Redemption Reserve.

 

The Capital Reduction took effect at the order of the Court confirming the Capital Reduction and a statement of capital approved by the Court has since been registered with the Registrar of Companies.

 

Movement in ordinary authorised share capital

 

 

Price per share pence

Number of ordinary shares issued

000s

Total number of shares

000s

 

 

 

 

 

 

As at 1 Apr 2015

 

 

 

 

20,225,673

Equity issue

 

June 2015

360

5,555,556

 

 

 

 

 

 

              

As at 30 Sep 2015

 

 

 

 

25,781,229

 

 

 

 

 

              

As at 1 Apr 2016

 

 

 

 

25,781,229

Exercise of warrants

 

June 2016

200

19,050

 

As at 30 Sep 2016

 

 

 

 

25,800,279

Share buy-back by company

 

June 2016

360

   (149,587)

 

Total number of shares excluding the number held in treasury

 

 

 

 

25,650,696

 

13           Retained earnings & Reserves

 

For the purpose of preparing the consolidated financial statement of the Group, the following reserves are held:

–       Share Capital represents the nominal value of the issued share capital of Palace Capital plc

–       Share Premium represents the excess over nominal value of the fair value consideration received for equity shares net of expenses of the share issue

–       In June Palace Capital plc purchased 149,587 of its own shares at an average price of £3.60. All these shares are held in treasury.

–       The Merger Reserve represents the excess over nominal value of the fair value consideration for the acquisition of subsidiaries satisfied by the issue of shares in accordance with S612 of the Companies Act 2006.

–       The Capital redemption reserve represents the cancellation of Deferred Shares and the removal of them from the Company’s balance sheet.

 

14           Post balance sheet events

 

There have been no post balance sheet events that would require disclosure or adjustments to these financial statements.

 

This information is provided by RNS
The company news service from the London Stock Exchange

Palace Capital Plc

(“Palace Capital“, the “Company” or the “Group“)

Interim results for the 6 months ended 30 September 2016

Palace Capital strategy gaining momentum

Income and capital focus delivering both dividend growth and NAV per share growth

By | 2018-03-30T07:38:29+00:00 November 21st, 2016|News|0 Comments